If you are looking to get into forex trading, and you heard some claims that may have caused concern, or they sound too good to be true — it is good that you have decided to look into myths and learn the truth about what is real and what is not. With all the scams, fake news, false promises, and baseless accusations, it is difficult to know what to trust and what to ignore.
This is why we have decided to tackle some of the largest myths related to forex trading and tell the truth of the matter. So, if you are interested in trading forex and you want to know more, here are 8 myths about it that are circling the web right now.
Top 8 myths about forex trading
1. It's easy
The first myth on our list is one that is most commonly encountered, and that's that forex trading is easy. In truth, it is not something that you cannot learn if you dedicate time, effort, and a certain amount of money. However, you should not trust those who say that all you need to do is read a book and set up a brokerage account, and money would start flying your way.
Trading is not easy, and that is something that should stick with you. Everyone who approaches it with a different mindset than that is about to see losses on their investment unless they get extremely lucky on their first try. You need to do a lot of research, learn of trading strategies, keep an eye on the market, and more in order to do it properly.
2. You need a degree in economics
While forex trading is, in fact, hard — it is not something that requires a degree in economics in order for you to join. You need to have an understanding of the world of economics to some extent, that much is true. However, that is something that you can achieve through extensive research on your own and following the markets, learning how certain events influence prices, and more.
From an academic standpoint, there are forex traders from all sorts of different backgrounds. All you need is a good head for numbers and a lot of patience.
3. You need a large investment
Yet another thing that is often said about the trading world is that you cannot start without thousands or even tens of thousands of dollars. This is not true. It was, back in the day when forex trading was only available to large international banks and financial institutions. However, ever since the internet brought it all online, forex trading, as well as any other kind of trading, became available to everyone. Not only that, but you can open a brokerage account with only $25.
You can, of course, use as much money as you can spare for such a purpose and still continue to lead your life as usual. But, if you thought that the biggest obstacle for you is money, this is definitely not the case.
4. You need a constant relationship with the market
There are some who would claim that you need to constantly watch the market, and even to be able to predict what will happen. Neither of these is true. The forex market is open nonstop, and it requires a lot of commitment; that much is accurate. However, do not believe those who claim that you need to be present 24 hours and that the rest of your life has to stop.
The truth is, you can neither be on the market 24/7 nor can you predict what will happen to it. The best you, or anyone else, can do is dedicate as much time as possible while still leading a normal life. During the time that you have for the market, you need to be careful and react quickly to changes. Some things can be predicted due to geopolitical events, although those are rare, and most of the time, quick moves are what truly earn money.
5. The market is rigged
Some people, mostly those who don't know what they are doing and believe all kinds of myths, often suffer losses due to bad trades. When this happens, they start complaining and claiming that the market is rigged, or that the brokers are scamming them.
Now, while it is true that countries and/or central banks can control the prices of currencies to an extent, the market itself is genuine. However, it is still very liquid, and very volatile, This causes sharp changes in the value of currencies, but it also protects the market from being rigged in the first place. In truth, you need to be a careful, disciplined, and experienced trader who can recognize subtle changes and signs, which show when it is time to act, and when you should hold your ground.
6. Forex will make you rich quickly
Quick prosperity is often praised to such an extent that the myth of getting rich quickly with only a few forex trades got quite a bit of ground for itself. However, in truth, quick prosperity through forex trading is extremely rare, and a small amount of effort is more likely to lead to losses than to massive gains.
Trading takes time to learn, and even more, time to master, and even then, it is all too easy to make a bad move and lose the money you had invested. You need patience, consistency, a good plan, and the ability to stay level-headed even when things don't go your way. Keep your cool, accept losses, and learn from them.
7. Complicated strategies are likely to bring profits
This one is also commonly mentioned to new forex traders, and it is not entirely false, but it is not entirely true, either. There have been cases when unconventional and complicated strategies resulted in large gains, but those are quite rare, and more often than not, you are likely to get confused and make a wrong move.
You need to really know what you are doing and have years and years of experience, but also quite a bit of luck. Keep it simple, especially if you are still new, and your chances of making any profit will significantly increase.
8. The higher the leverage, the better
Lastly, we have trading forex on margin, which means trading with leverage. Of course, the higher the leverage, the bigger the returns, but only when you get it right. Trading forex is complicated and risky even with no leverage involved. If you go for high leverage, that risk increases as much as the reward, if not more, as you get less and less room for mistakes.
Exerts with a lot of money that are not afraid of risking it can take such a gamble. For new traders, on the other hand, it is recommended not to do so, as you stand much, much greater chances of seeing large losses than of making massive profits. Once again, the best you can hope for is to get lucky, although your chances are extremely small.
In the end, forex trading is a legitimate way to make money, but it is neither easy nor can you do it quickly and effortlessly. It requires dedication, patience, a leveled head, and some money in order to start. That money doesn't have to be measured in thousands of dollars, and you can do it with a small amount of pocket money too, although you shouldn't expect massive earnings, even if you get it right.
Small amounts are a good way to start, as you are learning the ropes and developing as a trader. Just remember not to use more than you can afford to lose, as losses are obligatory even for professionals, Predicting the price movements is next to impossible, so make sure to have quick reflexes, wait for the right signs, and always keep learning more.
Author: Ali Raza - A journalist, with experience in web journalism and marketing. Ali holds a master's degree in finance and writes extensively about the financial markets and fin-tech industries.